N.J.'s Takeover Of Failed HMO Assuages Docs

Three weeks after taking over HIP Health Plan's bankrupt New Jersey unit, state regulators reached an agreement with the Medical Society of New Jersey that kept its physicians from making good on a threat to refuse treatment to nonhospitalized HIP members.

It is estimated that physicians and hospitals are owed $100 million for care to HIP members. The state will immediately pay doctors and hospitals one third of outstanding claims, and providers agreed to accept 75 percent of what they bill during the next 90 days. If by then HIP remains insolvent, the state will liquidate it and use proceeds to pay creditors.

New Jersey's banking and insurance commissioner also proposed a guaranty fund financed by the state's HMOs. The fund would, in part, pay claims retroactively for care for HIP members. The New Jersey Association of Health Plans said such a fund would drive smaller HMOs out of business.